This module allows you to analyze existing cross correlation between BSE and S&P 500. You can compare the effects of market volatilities on BSE and SP 500 and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BSE with a short position of SP 500. See also your portfolio center. Please also check ongoing floating volatility patterns of BSE and SP 500.

Pair Volatility

Assuming 30 trading days horizon, BSE is expected to under-perform the SP 500. But the index apears to be less risky and, when comparing its historical volatility, BSE is 1.92 times less risky than SP 500. The index trades about -0.28 of its potential returns per unit of risk. The S&P 500 is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 281,030 in S&P 500 on January 19, 2018 and sell it today you would lose (7,808) from holding S&P 500 or give up 2.78% of portfolio value over 30 days.

Correlation Coefficient

Pair Corralation between BSE and SP 500

0.68

Parameters

Diversification

Poor diversification

Overlapping area represents the amount of risk that can be diversified away by holding BSE and S&P 500 in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on SP 500 and BSE is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BSE are associated (or correlated) with SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 has no effect on the direction of BSE i.e. BSE and SP 500 go up and down completely randomly.